What you need to know about the protection of transferred money

What you need to know about the protection of transferred money

It will now be harder for fraudulent solicitors to get away with transferring money, as the new measures come into effect on 1 August 2011.

The Singapore government has taken steps to ensure the safety of buyer’s money deposited with solicitors in a property transaction. This happened as there were several cases of lawyers absconding with the money.

In Singapore, when you buy a property, the process is as follows:-

1. After the price of the property is agreed upon, the buyer gives the seller an option fee or some people call it a lien in exchange for the option form. This is usually 1% of the purchase price of the property.
2. Usually after 2 weeks (again this can vary by buyer and seller) the buyer exercises the option by paying the balance of 4% or 9% (depending on whether the buyer has another outstanding home loan) and this is the option deposit.
3. Payment of stamp duty is required to be paid by the buyer at this stage.
4. The balance of the sales proceeds will be paid out, usually after 10 weeks.

The option fee is usually given directly to the seller, so this is not affected by the new measures.

The option deposit is paid by the buyer to the seller when they exercise the option to purchase the property using the option form. Here comes the guidelines. The optional deposit, which is either by check or cash, is now required to be made to:

• Transfer account of the seller’s attorney in the form “- CVY” or
• Singapore Academy of Law

And this should be stated in the option form.

The stamp duty is paid either:

1. Directly to the Commissioner of Stamp Duties with the payment voucher (solicitors will electronically stamp the necessary documents to receive the payment voucher) or
2. By depositing at:
   • Your attorney’s transfer bill ” – CVY” or
   • Singapore Academy of Law

The remainder of the sales proceeds can be paid in 1 of 3 ways:

1. The money to be transferred to the transfer account of the lawyer “- CVY”
2. The money will be made available to the Singapore Academy of Law
3. Direct payment to the seller or his nominees

Additional means, e.g. calculation of rent, tax payments may be required to be paid by the buyer. In such event, the buyer may be asked to set aside such amounts up to S$5,000 for each property or S$2,000 for complex properties. However, this is not mandatory. The money can be paid into a normal customer account.

To ensure the safety of the transfer money, funds from the transfer account or those held by the Singapore Law Academy can only be withdrawn with the joint authorization of the buyer’s and seller’s solicitors. Lawyers who do not comply with the new ruling can be fined up to S$50,000 and/or 3 months imprisonment.

In conclusion, for buyers, be sure to put the suffix “CVY” on the payee end when you issue a check for the escrow account, and for sellers, never let anyone receive the sale proceeds on your behalf unless they are someone, who you trust.

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